Technically Speaking

Monthly Analysis: Livestock Markets

Live Cattle: The December contract closed at $166.05, up 2.575 for the month. The major (long-term) trend remains up as the December contract established a new high of $170.00 in October. Monthly stochastics remain above the overbought level of 80%, but have for the majority of months since September 2010.

Feeder Cattle: The November contract closed at $228.475, down $6.95 for the month. While the November contract established a new high of $230.80, it did close lower for the month hinting at a possible change in the major (long-term) trend. In conjunction with the lower close, monthly stochastics posted a bearish crossover above the overbought level of 80%. The last time the feeder cattle market saw this combination (new high, lower close, bearish crossover by monthly stochastics) was back in April 2011. From the April high of $142.00 the futures market dipped to $121.375 while establishing a bullish reversal in June 2011.

Lean hogs: The December contract closed at $88.025, down $6.50 for the month. The major (long-term) trend is down, building on the bearish reversal seen at the end of July 2014. However, the market's long-term 3 to 4 year 6-point cycle chart shows the normal timeframe for a point-2 low is between August and October (for more information, see the Technically Speaking blog post from July 9), meaning the October settlement could be this cycle's low. The projected Point 3 high would be next April or May.

Corn (Cash): The DTN National Corn Index (NCI.X, national average cash price) closed at $3.36, up 52 cents for the month. The NCI.X fell 1 3/4 cent short of establishing a bullish key reversal, similar to what was seen in the corn futures market. However, closing at its high for the month leaves open the possibility of a bullish breakaway gap in November. And when combined with the bearish gap left on the monthly chart last July, would establish an island bottom formation. Monthly stochastics established a secondary (confirming) bullish crossover below the oversold level of 20% but above the initial crossover posted at the end of February 2014. This would indicate the trend of the market has turned up, putting the long-term price target near $4.90. This price marks the 38.2% retracement level of the previous downtrend from $8.26 (August 2012) through $2.81 (October 2014).

Soybean meal: The December contract closed at $389.00, up $90.10 for the month. Activity over the course of October saw the December contract post a new low of $295.10 before posting a strong rally, taking out the September high $362. This creates a bullish key reversal, indicating the major (long-term) trend has turned up. However, the sharp rally to close out the month has the more active Dec contract testing initial resistance at $389.30, a price that marks the 38.2% retracement level of the previous downtrend from $541.80 (September 2012) through the September low. Given the strengthening inverse in the market's forward curve, reflecting long-term bullish fundamentals, the futures market could test the 61.8% retracement of $447.60 if not the June 2014 high of $509.40.

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